Editor’s Note: In the new podcast Masters of Scale, LinkedIn co-founder and Greylock partner Reid Hoffman explores his philosophy on how to scale a business -- and at Entrepreneur.com, entrepreneurs are responding with their own ideas and experiences on our hub. This week, we’re discussing Hoffman’s theory: the smartest companies don't tell their employees how to innovate, they manage the chaos. Listen to this week's episode here.

Some entrepreneurs believe that working closely within one office space in an unstructured way fosters innovation. I take a different approach to my organization's culture to encourage innovation.

For those startups that use a virtual team, this advice is particularly important. Even with physical distance, it's still possible to build an innovative culture. Here's how I've done it.

Why virtual?

I have opted for virtual team members that are primarily freelance or outsource relationships. Rather than establishing an office where I require the team to work, the virtual structure is cost effective and provides access to a wider talent pool.

The ability to tap into talent all over the world provides access to the best creatives and tech minds available. This format for working together also allows me to scale the business at the right pace and lets me pivot, if necessary.

Flexibility and DIY structure

While every team member has a set of clear responsibilities that they must accomplish, including specific projects and tasks, the virtual environment gives them the flexibility to work when they know they can be the most productive. For some of the team, working early in the morning stimulates their creativity while others are night owls. Allowing them to set their schedule is part of an innovative culture that empowers their creativity.

When I worked in companies that adhered to a rigid work schedule, it made it difficult to think and be innovative because I was always tied to the clock. This type of culture has your team focusing on the wrong things. You want them to be exploring and reflecting, not clock watching. Innovation doesn't necessarily happen between the hours of 9 a.m. and 5 p.m. on a Monday through Friday.

As long as you select talent that is self-disciplined, you will find that innovation flows when you let them pick their work hours.

Knowledge sharing and constructive feedback

Part of our innovation culture is the emphasis on knowledge sharing among team members. From the start, I encouraged everyone to share their ideas, experience from previous projects and information they have gathered over their careers that can help our project. Starting with me, I've shown others on the team that I consider it important to listen to what others have to say and suggest. That shows the team that even the leader can learn from others about what might work better with our platform. This has helped propel the overall solution further along.

When it's time for testing and development, everyone on the team gets involved and shares their opinions on what works and what isn't working. Some of the most innovative ideas have come from non-technical members of the virtual team. They are freelancers and small business owners like our target audience. These team members have a similar mindset and can share their own experiences that help developers build a better product.

Set the example for your virtual team, and they will feel comfortable throwing out any and all ideas they have rather than being afraid what they have to say will be disregarded.

Open and frequent communication

It was important to establish a culture that focused on open and frequent communication. This stimulates innovation by providing a mechanism to get questions answered quickly. The team can also minimize concerns with near immediate responses.

The faster information can be spread among the team, the more likely innovation can happen. It's part of providing the necessary tools to stimulate creativity and idea exchange. My team uses Slack. This tool has been the most effective way for everyone to communicate. Files can be uploaded and passed around in seconds. We can also call each other through the platform. This one-on-one conversation is more personal than the instant messaging format typically used.

Encourage your team to incorporate as many communication channels as possible on all their devices to stay connected at all times.

Other important online tools

Online tools are vital for embedding this innovation culture in the hearts and minds of my virtual team. These tools reinforce the ideas of flexibility, knowledge sharing, collaboration and communication. Whether it is a project management platform like Basecamp or a collaboration enabler like Google Docs, these tools play an integral role in letting my team members create and innovate. They can work smarter and spend less time on the tedious aspects of projects. This gives them more time to focus on the creative side of a project and the luxury to experiment and try different approaches to solving issues or barriers we experience with our products.

Ask your team what type of tools help them feel like they have the time and space to innovate. Then provide those or find similar tools that help them. This activates your innovation culture and shows them that you are doing your part to develop and manage that environment.

While there may be other tactics to employ in your startup that encourage a culture of innovation, these approaches have been a vital part of developing and encouraging the innovation we have leveraged to design, market and continue to improve our online invoicing and payments solution.

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